Critical Components of Downsizing

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Learn the Five Critical Components of Downsizing to Become a Better Manager

How Downsizing Affects More Than Just Separated Employees

Breaking news: Everyone hates downsizing, even the accounting and finance departments. Assuming you already know this fact, you should also be aware of some particulars that cause downsizing to affect your performance as a manager and your remaining staff.

Few people are unaware of the economic disasters faced by most downsized employees. Even during periods of national or global economic prosperity, some companies, facing stiff competitive challenges, declining revenue and profitability, or choosing to outsource some business functions, make the corporate decision to downsize employment levels. However, during these “up” periods, many talented employees have little trouble replacing their jobs with other employers also enjoying this prosperity.

Unfortunately, during serious national economic downturns, most businesses face declining revenues and profits, causing many to implement downsizing as a survival tactic. Therefore, the number and quality of professional opportunities dwindles just as the available talent pool explodes. This is a recipe for personal financial disaster that has been well-documented in recent years.

Often overlooked is the effect on remaining employees, managers, and overall company operations. For example, the staff that has escaped the downsizing “knife” is typically pleased and grateful at first. However, after the realization that the first wave of downsizing may be followed by others, uncertainty and sometimes fear often take control. Also, the realization that their job duties typically will expand – someone must do the job of those separated from the company – can lead to further discomfort, displeasure, and distrust. As a manager, you have seen or will see this condition up close and personal, creating some new management challenges for you.

The effects of downsizing on managers is often overlooked. People forget that managers have lost some valued co-workers and are affected just like everyone else. They are still responsible for generating high level output from their team. As a manager, you must somehow achieve this goal while facing at least three obstacles:

1. Reduced staff,
2. Uncomfortable or fearful remaining employees, and
3. Pressure for high performance during national economic struggles.

In most cases, understanding the prime components and results of downsizing should help you think outside the box and attack your responsibilities effectively. Here are some suggestions to help you succeed.

Five Critical Results of Downsizing and How to Manage Them

Timing. The timing of downsizing and your response to it is critical for success. While there is never a good time for downsizing, understand that remaining staff will perceive it as bad timing and become somewhat emotional. It is imperative that you act and react immediately during this difficult period to reassure and re-energize your staff.

1. Feelings and Emotions Are Negative and Fear-Inducing. This is a natural result of downsizing activities. To effectively manage your remaining team, let them know that you realize this and understand their feelings. This is not the time to play “hardball” with emotional staff members. Display empathy, compassion, and understanding to help get your team back on track.
   
   
2. Loss of Focus by Team Members. Downsizing creates a shift in focus from the job to be done to the loss of some jobs and the potential for further losses. A good manager understands this reaction, makes staff aware of this understanding, and proceeds to re-focus the team on the required goals to be achieved. This allows some “professional grieving” time, while limiting the unfocused period.
   
   
3. Managers Are Emotionally Affected, Too. Regardless of your experience and expertise, you will be affected by downsizing and the pressure of goal achievement with fewer people and other resources. You may also have feelings of personal loss as one or more of your former favorite employees may be lost temporarily or permanently. To be effective, you must overcome these feelings and re-focus yourself as quickly as possible. It’s better to admit your genuine concern than to publicly deny these feelings, as you run the risk of your staff believing you to be unconcerned or aloof to the downsizing and loss of valuable team members.
   
   
4. Resist the Tendency to “Under” Manage. There is a natural tendency for managers to take an “everything will work out” approach to the aftermath of downsizing. Directly addressing this uncomfortable situation is not easy, but it is a necessity for successful management and performance. Do not just assume things will work themselves out. The combination of reduced revenue and sales, a down national economy, and a recent painful downsizing provides too great a challenge to the majority of employees. If you make any mistakes, they should be on the side of “over managing". You’ll need all of your management skills, and possibly a few new ones, to overcome the natural let down that accompanies a downsizing.

Except for cost reduction, downsizing offers few operating benefits. You need to focus on achieving corporate goals. Understanding downsizing components, effects on your staff, and keeping your eyes on the prize will help you succeed in this difficult environment.